The automobile industry in India is expected to be the world's third largest by 2016.

Automobile Industry in India

Latest update: August, 2015

Passenger vehicle production in India

Market break-up by production volume

• Two wheelers dominate production volumes; in FY15, the segment accounted for about 79.40 per cent of the total automotive production in the country

• India is the world’s second-largest two wheeler manufacturer and fourth-largest producer of commercial vehicles

• A unique feature of Indian auto sector is the presence of three wheelers which are a form of public transportation equivalent to taxis

Passenger vehicle exports from India

Last Updated: August, 2015

SECTORAL REPORT | August, 2015


The Indian auto industry is one of the largest in the world with an annual production of 21.48 million vehicles in FY 2013-14.

The automobile industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP).

An expanding middle class, a young population, and an increasing interest of the companies in exploring the rural markets have made the two wheelers segment (with 80 per cent market share) the leader of the Indian automobile market. The overall passenger vehicle segment has 14 per cent market share.

India is also a substantial auto exporter, with solid export growth expectations for the near future. Various initiatives by the Government of India and the major automobile players in the Indian market is expected to make India a leader in the Two Wheeler and Four Wheeler market in the world by 2020.

Market Size

Sales of commercial vehicles in India grew 5.3 per cent to 52,481 units in January 2015 from a year ago, according to Society of Indian Automobile Manufacturers (SIAM).

Sales of cars also grew for a third month in a row to 169,300 units in January 2015, up 3.14 per cent from the year-ago period.

Car market leader Maruti Suzuki India witnessed 8.6 per cent higher sales at approximately 118,551 units in February 2015, out of which 107,892 were sold in domestic market and 10,659 units were exported.

Hyundai Motor India Ltd (HMIL) reported a 2.4 per cent growth in total sales at 47,612 units in February, compared with 46,505 units in the same month last year.

In the two-wheeler segment, Hero MotoCorp witnessed sales of 484,769 units in February 2015.

TVS Motor Co posted 15 per cent higher sales at 204,565 units against 177,662 units.

Bajaj Auto sold a total of 243,000 two and three-wheelers segment.


To match production with demand, many auto makers have started to invest heavily in various segments in the industry in the last few months. The industry has attracted foreign direct investment (FDI) worth US$ 12,232.06 million during the period April 2000 to February 2015, according to the data released by Department of Industrial Policy and Promotion (DIPP).

Some of the major investments and developments in the automobile sector in India are as follows:

  • DSK Hyosung has announced to set up a plant in Maharashtra and is planning to add 10-15 dealerships in the next financial year (FY 15-16) mostly in the tier-II cities and introduce more models in the 250cc segment.
  • Germany-based luxury car maker Bayerische Motoren Werke AG’s (BMW) local unit has announced to procure components from seven India-based auto parts makers.
  • Mahindra Two Wheelers Limited (MTWL) has acquired 51 per cent shares in France-based Peugeot Motocycles (PMTC).
  • Suzuki Motor Corp is planning to sell the automobiles made in the Gujarat plant, in Africa.
  • Tata Motors Ltd, India’s largest automobile maker, will sell trucks in Malaysia, Vietnam and Australia to strengthen its presence in the Asia-Pacific region.

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. Excise duty on small cars, scooters, motorcycles and commercial vehicles was reduced in February last year to 8 per cent from 12 per cent to boost the ‘Make in India’ initiative of the Indian government.

Some of the major initiatives taken by the Government of India are:

  • Under the Union budget of 2015-16, the Government has announced to provide credit of Rs 850,000 to farmers, which is expected to boost the tractors segment. The government is aligning to ensure that at least one family member is economically strong to support the family. This is expected to improve the sentiments of entry-level two-wheelers.
  • The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle, electric vehicle and also made mandatory of 5 per cent ethanol blending in petrol.
  • The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country.
  • The Automobile Mission Plan for the period 2006–2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.

Road Ahead

India is probably the most competitive country in the world for the automotive industry. It does not cover 100 per cent of technology or components required to make a car but it is giving a good 97 per cent, highlighted Mr Vicent Cobee, Corporate Vice-President, Nissan Motor’s Datsun.

The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”

The Japanese auto maker Maruti Suzuki expects the Indian passenger car market to reach four million units by 2020, up from 1.8 million units in 2013-14.

Exchange Rate Used: INR 1 = US$ 0.0157 as on April 28, 2015

References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2014-15

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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